TREASURIES-Middle East tensions drive US Treasury yields lower

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Iran preparing to launch ballistic missile attack against Israel, says senior White House official

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JOLTS report shows job openings rebounded by 329,000 to 8.040 million

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Manufacturing PMI unchanged at 47.2, indicating sector contraction

By Chuck Mikolajczak

NEW YORK, Oct 1 (Reuters) - U.S. Treasury yields dropped on Tuesday as signs that hostilities in the Middle East were escalating boosted safe-haven demand for bonds.

A senior White House official said on Tuesday the United States has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel, with the U.S. actively supporting preparations to defend Israel.

A U.S. official told Reuters that initial indications suggested the possible Iranian strike could be at least as large as the one in April, although it was difficult to be certain.

The yield on the benchmark U.S. 10-year Treasury note was down 8.6 basis points to 3.716% after falling to 3.696%, its lowest since Sept. 18.

In U.S. economic data, the Job Openings and Labor Turnover Survey, or JOLTS report, showed job openings, a measure of labor demand, rebounded by 329,000 to 8.040 million, but hiring was soft and consistent with a cooling labor market.

The manufacturing sector held steady at weaker levels in September, as the Institute for Supply Management (ISM) said its manufacturing PMI was unchanged at 47.2 last month, slightly below the 47.5 estimate of economists polled by Reuters. A PMI reading below 50 indicates contraction in the manufacturing sector.

"One of the reasons why the market went to reverse so hard was because of this geopolitical risk that we're seeing," said Tom di Galoma, managing director and head of fixed income at Curvature Securities in Park City, Utah.

"Also, we did get some data that was a bit weaker... but the overriding factor right now is this geopolitical talk and what exactly is going to happen in the Mideast and where else."

The yield on the 30-year bond fell 7.6 basis points to 4.057%.

Yields had risen on Monday after Federal Reserve Chair Jerome Powell suggested the central bank will take a gradual approach in cutting interest rates.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 11.6 basis points.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, declined 5.1 basis points to 3.6%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.090% after closing at 2.086% on Sept. 30.

The 10-year TIPS breakeven rate was last at 2.181%, indicating the market sees inflation averaging about 2.2% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Andrea Ricci)